Welcome to Secretary-Treasurer Training!

You have been elected/appointed to a position of trust.

Your instructor, will provide you with information relating to federal laws, constitutional responsibilities, and suggestions for building a stronger local/state union.

If you have any questions at the conclusion of this presentation, please do not hesitate to contact me, or your instructor, Roosevelt Stewart.

Yours In Union Solidarity,

Elizabeth Powell

2.0

Local Union Tax-Exempt/Non Profit Status

APWU Secretary-Treasurer Training

Cliff Guffey, PresidentElizabeth Powell, Secretary-Treasurer

Webinars • Fiduciary Responsibilities of Union Officers

• New Officers Training & Responsibilities

• LM Reporting

• Travel & Expenses

• Local Elections (Officers, committee members)

• DOL & IRS Requirements and Audits

• Recording Secretary Duties

• COPA Funds

• Trustee Training

• Renting vs. Owning

• Budgeting

• Tax-Exempt Status

What Is a "Labor Organization?

• An association of workers

• Who have combined to protect or promote the interests of the members

• By bargaining collectively with their employers

• To secure better working conditions, wages, and similar benefits.

The term embraces labor unions, councils, and committees.

What is a Non-Profit?

A nonprofit differs from a for-profit organization in that it does not benefit the private interests of any individual or organization. A nonprofit organization must serve the public good. Profits are not paid to individuals but channeled back into the organization's activities. However, you can pay reasonable salaries to staff and officers.

Non-profit Status

• APWU locals are a 501c(5) organization.

• The group tax exempt # is 2474.

• A copy of the national tax-exempt letter is available upon request

What is the difference between non-profit and tax-exempt status?

Non-profit status is a state law concept. Non-profit status may make an organization eligible for certain benefits, such as state sales, property, and income tax exemptions.

What is the difference between non-profit and tax-exempt status?

Although most federal tax-exempt organizations are non-profit organizations to qualify as exempt from federal income taxes, an organization must meet requirements set forth in the Internal Revenue Code.

Types of Tax-Exempt Labor Organizations

• Local Unions

• State Organizations

• National Union

• Accident Benefit Association

Types of Tax-Exempt Labor Organizations

Retiree Chapters

An organization composed of retired employees can qualify for exemption as a labor organization under IRC 501(c)(5) where it acts to secure and maintain retirement benefits for its members.

Taxes

• IRC 501(c)(5) provides for the exemption from federal income tax of labor, agricultural, or horticultural organizations.

• We must pay sales tax for purchases and payroll taxes for our employees.

• We don’t have to pay taxes on the interest we earn on our investments unless money borrowed to finance the investment.

WHO IS AN EMPLOYEE?

Generally, a worker who performs services for the you is an employee if the you have the right to control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

WHO IS AN EMPLOYEE?

Employee

• Officer

• Steward

• Member

• Office staff

Not an Employee

• Attorney

• Accountant

• Contract custodian

• Consultant

• Contractor

LOCAL PAYROLL REQUIREMENTS

• I-9 Employment Eligibility Verification

• W-4 Employee Withholding Allowance Certificate

• Properly approved pay voucher

• Constitutional language which clearly spells out officer and steward compensation

PAYROLL TAXES

• Employee federal income taxes

• Employee social security and Medicare taxes

• Employee state and local taxes

• Employer social security and Medicare taxes

IRS Reporting

All local union must file the IRS Form 990, 990-EZ, or 990-N annually. All these forms must be filed every year by the 15th day of the 5th month after the close of the local’s fiscal year.

http://www.irs.gov/charities/article/0,,id=180867,00.html

990 Reporting

Local unions must file a Form 990 return by the 15th day of the fifth month after the organization's fiscal year ends. Locals with less than $50,000 in gross receipts for the fiscal year have to file an electronic postcard over the internet. The IRS allows 501(c)(5) organizations to receive a three-month filing extension by filing Form 8868

990-N e Postcard

• $0- $49,999 annual receipts/$0-$199,999 total assets

• File form 990-N (this is filed electronically-there is no paper form. Even if you have no annual receipts, this form must be filed to retain your local non-profit status. (no IRS penalty for late filing)

Form 990-EZ

• $50,000 –$199,999 annual receipts/$200,000-$499,999

• File form 990-EZ (IRS penalty for late filing)

Form 990

• More than $200,000 annual receipts/more than $500,000

• File form 990 (IRS penalty for late filing)• These new regulations will require fewer mid to

small sized locals to file the 990-EZ and more mid size locals will have to now file the much more detailed 990 tax form. Local union officers who are filing a 990 for the first time are urged to seek professional help to file the 990 form.

Why Was the Local Tax-Exempt Status Revoked?

In most cases, the local failed to file the required annual electronic notice (Form 990-N e-Postcard) for three consecutive tax year beginning in 2007, 2008 and 2009. Prior to 2007, local unions with total receipts of less than $25,000 were not required to file any report to the IRS.

Can the Local’s Tax-Exempt Status Revoked for Any Other Reason?

Yes. If a local makes substantial unrelated business income, it could jeopardize the local’s tax-exempt status. If you have any questions about excessive unrelated business income consult your accountant or call the national office.

Unrelated Business Income

• If your organization earns more than $1000 during the year, it must file IRS form 990-T, Exempt Organization Business Income Tax Return. Too much UBI can threaten your tax-exempt status. You could be in trouble if UBI takes up more time and attention than your mission. The IRS provides an excellent online tutorial on UBI that goes into the intricacies of this kind of income.

http://www.stayexempt.org/virtualworkshop/UnrelatedBusinessIncome.aspxhttp://www.stayexempt.org/virtualworkshop/UnrelatedBusinessIncome.aspx

Unrelated Business Income

• The area of UBI is complex but basically it means that your union may not receive income from a regularly-carried-on trade or business that is not related to your mission. If you generate funds from a business activity but it is not regular, you will probably not have to pay taxes on that income but it won't jeopardize your tax-exempt status. An example would be selling merchandise once a year at a fair.

Local Employer Identification Number

• Every Local must have a EIN number from the IRS to report employment taxes and to issue tax statements. The EIN is a 9-digit number the IRS issues. The national union has a listing of all the EIN numbers for APWU locals. If your local has no number, this office will assist you in applying for one.

Who Qualifies for Special Reinstatement of Tax Exempt Status

• To qualify for reinstatement the total local receipts for the tax years cannot exceed:

– $50,000 in 2011

– $50,00 in 2010

– $25,000 in 2009

– $25,000 in 2008

– $25,000 in 2007

– $25,000 in 2006

Applying for Reinstatement

The following forms will be provided by this office upon request:

• Form 1024 – Application for Reinstatement

• Form 8718 – User Fee Form

• Procedural Checklist

Applying for Reinstatement

• Local unions must include a copy of their local constitution with form 1024. All filers must include a copy of the organization's financialstatements when resubmitting as an 501(c)(5) to the IRS.

• Filers can submit their completed 501(c)(5) application to the Internal Revenue Service, P.O. Box 12192, Covington, KY 41012-0192.

http://www.ehow.com/info_8016646_irs-filing-rules-501c5.html

Application for Reinstatement

• The application for reinstatement of tax-exempt status must be postmarked no later than December 31, 2012.

• The fee for reinstatement is $100 which must accompany the application.

• Reinstated 990-N locals will have their tax-exempt status restored retroactive to the date it was revoked. (990-EZ & 990 have different procedures)

Application for Reinstatement

• A local union submitting an application for reinstatement must write

“Notice 2011-43”

• on the top of the form 1024 and on the envelope used to mail the form.

Application for Reinstatement

(This statement must be attached to 1024 form)

“[Name of Organization] was not required to file annual information returns for taxable years beginning before 2007; was eligible in each of its taxable years beginning in 2007,2008 and 2009 to file a Form 990-N e-Postcard; and had annual gross receipts of normally not more than $25,000 in each of its taxable years beginning in 2007, 2008 and 2009.”

End of presentation

Elizabeth Powell, our Secretary-Treasurer would like to thank you for participating in this presentation. Your feedback is very important to us because it will help us improve our training. Please feel free to comment, both negative and positive, about this program.

Please feel free to email your comments to RStewart@apwu.org

202 842 4215

If you would like a copy of this presentation, please send an email request to dsutton@apwu.org or mail a copy of your request to Delores Sutton in the Secretary-Treasurer’s Department.

mailto:RStewart@apwu.orgmailto:dsutton@apwu.org